Project-import concession requires truthful disclosure and strict compliance; misstatement and diversion can justify reassessment, confiscation, penalty, and duty recovery.

Concessional project-import treatment depends on truthful disclosure and compliance with the registration, licence, and end-use conditions. Where the importer stated that machinery was for expansion of its existing plant, although the transfer agreement had already been executed and the goods were not installed in its premises, the declaration was materially incorrect and reassessment on merits was justified. Breach of the licence condition against transfer or diversion attracted confiscation, and penalty could follow even if the goods were no longer physically available. Short levy caused by misstatement and non-disclosure could also be recovered under the extended limitation provision, as the customs authorities were entitled to examine whether the import conditions were fulfilled.

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Issues: (i) whether the appellant had misdeclared material facts in the project import application and Bill of Entry so as to justify reassessment and denial of concessional assessment; (ii) whether the imported machinery became liable to confiscation and penalty for breach of the conditions attached to the import licence and project import concession; (iii) whether the proviso to section 28(1) of the Customs Act, 1962 could be invoked for recovery of short-levied duty and whether the customs authorities lacked jurisdiction to proceed on the basis of subsequent events.

Issue (i): whether the appellant had misdeclared material facts in the project import application and Bill of Entry so as to justify reassessment and denial of concessional assessment;

Analysis: The concessional project import benefit was not a matter of right but depended upon compliance with the project-import conditions, the import licence, and the registration requirements. The agreement for transfer of the business and machinery had already been executed before the application for project-import registration, yet the application stated that the machinery was meant for substantial expansion of the appellant's existing plant. The machinery was also not installed in the appellant's premises. The declaration in the application for registration was therefore inconsistent with the true state of affairs, and the earlier concessional assessment was obtained on a materially incorrect basis.

Conclusion: The misdeclaration was established and reassessment on merits was justified, in favour of the Revenue.

Issue (ii): whether the imported machinery became liable to confiscation and penalty for breach of the conditions attached to the import licence and project import concession;

Analysis: The import licence prohibited transfer or sale of the goods and required their use in the licensee's premises for the intended purpose. No effective prior or subsequent permission for transfer was obtained, and the machinery was diverted to another factory instead of being used for substantial expansion of the appellant's unit. Breach of the conditions attached to the concession attracted the confiscatory provisions, and liability to penalty followed once the goods were found liable to confiscation, even though they were not physically available for seizure.

Conclusion: The goods were liable to confiscation under the relevant customs provisions and the penalty was sustainable, in favour of the Revenue.

Issue (iii): whether the proviso to section 28(1) of the Customs Act, 1962 could be invoked for recovery of short-levied duty and whether the customs authorities lacked jurisdiction to proceed on the basis of subsequent events.

Analysis: The short levy resulted from the incorrect representation made to obtain concessional assessment, and the intended transfer as well as the actual transfer were not disclosed to Customs. The authorities were competent to consider whether the conditions for import had been fulfilled and whether duty had been short levied by reason of suppression and misstatement. The case did not turn on an impermissible reliance on irrelevant later events, but on the legal effect of the appellant's non-disclosure and breach of conditions.

Conclusion: The extended limitation provision could be invoked and there was no jurisdictional infirmity, in favour of the Revenue.

Final Conclusion: The order of reassessment, confiscatory liability, and penalty was upheld because the project-import concession had been obtained on incorrect declarations and the conditions attached to the import had been violated.

Ratio Decidendi: Concessional project-import treatment is conditional upon truthful disclosure and strict compliance with the governing import and licence conditions; where material facts are suppressed and the conditions are breached, reassessment, confiscation liability, and penalty may lawfully follow.

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